Is it OK for retailers to track shoppers with smartphones?

Shopper tracking might seem new to consumers but as far as retailers are concerned, the strategy isn’t.

The New York Times published a piece on the trend in July and noted that Family Dollar, Benetton, and Cabela's are among the stores that are using Wi-Fi signals and consumers’ smartphones to track shoppers in stores. Nordstrom also tried tracking users via their Wi-Fi signals but abandoned the effort after customers complained.

Yes
31% (52)

No
69% (115)

167 total votes.

Even though the technology available to them -- through ShopperTrak, Euclid Analytics and others like them -- has some serious "1984" potential, retail companies say they use it in much the same way they have used store employees, security cameras, loyalty programs and even credit card purchases for decades to document consumers' shopping and spending habits.

"If you actually look at what the retailers are doing, it's pretty straightforward things," said Mallory Duncan, senior vice president, general counsel for the National Retail Federation.

All of the retailers he has spoken with have told him they use wireless technology to gather data about patterns of movement through the store, and that's consistent with what they have been doing for years. This is just a more efficient way to do the same thing, he said.

What do they do with the information? Ideally, Duncan said, they're improving your next shopping experience by making it more efficient and grouping the types of products you like in one place

If a retailer sees that most shoppers move from Spot A to Spot J, for example, it might be a good idea to move the items in Spot J closer to Spot A, so customers buying those things together don't have to travel as far through the store to get what they want. A store might even offer a promotion discounting those related items, saving shoppers both time and money.

The big retailers have the most to gain from such sophisticated data, Duncan said, but they aren't the only ones observing consumer behavior.

"I’m sure you’ve walked into small merchants’ stores, and you’ve seen them move things around, trying to make things fresh or catch the customer's eye," he said. "That is really the store manager essentially trying to accomplish the same thing that a larger retailer does with these analytics."

Most shoppers have grown comfortable with video surveillance because it offers protection, and are accustomed to being observed by store personnel. Many even actively share their purchasing habits via loyalty programs because they are rewarded with personalized coupons and special deals.

But when mobile tracking programs were publicized, retailers got pushback from shoppers concerned about privacy, and public calls from Sen. Charles Schumer, D-N.Y., to either regulate or end the programs, which he said were "intrusive and unsettling."

Wendy Patrick, a business ethics lecturer at San Diego State University, said the visceral reaction to mobile shopper tracking has everything to do with people's sense of control over information about themselves.

While it might seem ironic in a society whose members pride themselves on mobile "check-ins" and broadcasting personal information on their social media accounts, she said, consumers are very conscious of their privacy. Most want to feel that they control their personal information, which is why it was so jarring for many when they learned that their movements were being tracked without their knowledge.

Their shock was likely exacerbated by other recent privacy controversies involving the National Security Administration and the Internal Revenue Service, Patrick noted.

The fact that some retailers have been using the mobile technology under the radar for a long time now is no consolation, either.

Retailers are not legally obligated to tell customers that they are being followed digitally, so it's unclear how widespread such tracking technology actually is. Westfield, which operates seven malls throughout San Diego County, only counts people entering its malls; it does not track their movements. Simon Property Group said it also does not follow mall patrons' movements, and it could not speak on behalf of the retailers in its Fashion Valley, Carlsbad and San Ysidro malls.

Meanwhile, a casual stroll through Fashion Valley reveals that the merchants are not taking special measures to either alert their customers about potential tracking software, or reassure them of its absence.

Still, many retailers who have invested in such programs in recent weeks have scaled back or posted placards to let customers know they can opt out. Others, like Nordstrom, have abandoned mobile tracking altogether.

"At this point, the retailers don't want to alienate the customers," Duncan said.

But this is only the beginning of the conversation, Patrick predicted, because when it comes to retailers learning more about their customers, this controversy is the perfect opportunity.

"On one hand, you have consumers who don't mind retailers learning how to market products better," she said. "Then there’s this aversion to retailers knowing what they’re interested in, and the people who don't want to be followed around virtually or in person. I’m going to be watching how this shakes out, because it certainly is a product of the new millennium."

It will be important in the coming months, Duncan said, for consumers to get as much information as possible and talk to their merchants about both the the benefits and privacy concerns associated with tracking programs.

As for regulation, he said, lawmakers ought to do the same, and give the technology a fair chance before condemning it.

"Often when new technology is introduced, it takes people a while to understand what the technology is doing, so there’s a tendency to project onto the technology things or expectations that are different from the reality," he said. "Until people become comfortable and realize, 'Oh, this is a little bit like the security guys keeping an eye on things,' then there’s a tendency to over-interpret what’s happening."

Meanwhile, he said, it is in a retailer's best interests to listen to customers and respond proactively.